Wealth International, Limited

Offshore News Digest for Week of October 24, 2005

Note:  This week’s Financial Digest may be found here.

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The South African government is steeling itself for a battle with platinum and gold miners in the country over its new precious metals legislation. Miners across the country are opposing new rules which are designed to boost the local processing of precious metals. Mining companies are claiming that the legislation will merely succeed in increasing the bureaucracy surrounding the mining industry and will in fact have very little effect on the promotion of more local processing.

Mining companies had hoped that the Bill would go some way to reducing the regulatory burdens placed on them, after the September draft had proposed to cut the red tape in the precious metals industry. An excessive regulatory framework has been blamed by mining companies for South Africa’s precious metals market falling from 21% of the country’s GDP during the 1980s to 17% today.

Link here.


Talks between the UK Government and the authorities of the Turks and Caicos Islands have successfully concluded with an historic agreement for an advanced constitution for the Caribbean territory, Chief Minister for Turks & Caicos, Michael Misick, has announced. The process of Constitutional Review started in April 2002 with the establishment of the Constitutional Modernisation Review Body, appointed by then Governor, Mervyn Jones. The Report of the Review Body was presented to the Governor in September 2002.

The next stage of the process will be the drafting of the new constitution by officials of the Foreign and Commonwealth Office. The draft document will be provided to the Government and Opposition for their comments. Afterwards, the draft will be circulated among the general public so that they can familiarize themselves with the provisions of the text. This consultative process will be concluded by a debate on the new constitution in the Legislative Council. It is anticipated that most of the changes will take effect early next year.

Link here. CIA World Factbook on the Turks and Caicos here.


Panamanian student leaders declared they will stand firm in their decision to publicly condemn the U.S. president’s visit, despite recent police repression and the closure of educational centers. “We will give a warm welcome to the greatest genocidal killer on earth,” university leader Javier Vasquez told reporters, referring to George W. Bush’s visit to Panama on November 6 and 7. Vasquez added that the current Panama government policy is to obey the mandates of “Emperor Bush”, a position most Panamanians condemn.

The student leader added that the peaceful protests will be resumed next week, with leaflets calling the people to reject Bush’s visit as well as the rise in fuel prices and a possible increase in bus fares. A coalition of trade unions and social organizations, headed by the Panamanian Human Rights Committee, have announced several actions to condemn Bush’s presence in Panama. “The visit should not take place, because Bush is persona non grata in Panama and in the entire world. He is a human rights violator,” said Fr. Conrado Sanjur.

Link here.


Today’s cruise ships are sights to behold, drawing crowds of onlookers whenever they glide into port. Completed in March 2002, The World is less a cruise ship than a one-of-a-kind floating condo, a collection of private residences at sea – a where buyers require a minimum net worth of $5 million, and unit rentals start at $1,000 per night. It boasts 165 apartments, 106 of which are fully equipped with kitchens built in steel boxes. (In case of fire, the resident pushes an alarm, sending hidden-in-the-ceiling steel doors to the floor, thus starving the fire of oxygen.)

Typically, a ship of 43,000 gross tons would carry 1,100 passengers and crew, a number that shrinks the open space on a vessel. But the average number of passengers on The World is 200, a figure that makes it possible for ResidenSea, the Miami-based firm that manages the ship on behalf of resident owners, to create an experience akin to life in a small luxury resort – except this one transports residents to the world’s finest destinations.

Privacy is a key selling point, and the ship is treated as the private home of its residents. It is not a tax haven (as some assumed) – to become a resident, you must have a permanent land address. About half the owners (most are in their early 50s, but ages range from 35 to 85) are American. The rest are Europeans and Asians with a smattering of Canadians. Residents spend three to four months on board, although most spread that time over the course of a year. 60% of residents have never been on a cruise line before, but 75% have owned private yachts, and the private yacht experience is what The World tries to replicate.

Link here.


Hong Kong’s new chief executive, Donald Tsang, is on a trip to sell the territory and himself in New York, Washington and London. He will be speaking of Hong Kong’s renewed economic dynamism, initiatives to streamline government, and its attractions as a law-based society which is also part of a booming China. He may hint too at his own political skills and popularity, so far, compared with his bumbling if likable predecessor, Tung Chee-hwa. Let us hope, however, that the conversations are not one-way affairs. The visits come in the wake of Tsang’s first annual policy address and the announcement of constitutional changes. His hosts have a right to quiz him on various Hong Kong issues that he cannot hide behind the veil of “internal affairs”. And for the good of Hong Kong, he should listen to them.

In the first place, Hong Kong is the subject of an international treaty between China and Britain that enshrines the territory’s separate status and commitments to the rule of law and to progress toward representative government – much of which is further elaborated in China’s Basic Law or mini-constitution for Hong Kong. Tsang’s hosts in Washington and London, who like to preach about spreading democracy, should note the minimal progress toward directly elected government in Tsang’s recently unveiled constitutional proposals.

They may give Tsang the benefit of the doubt on the electoral system on the understanding that he is going as far as Beijing, increasingly nervous of the word democracy, will allow. But they might give him little such benefit were they apprised of the tone and content of his policy address. It included, in the name of efficient, “executive-led” government, the centralization of power within the bureaucracy and emphasis on the accountability of ministers to the chief executive, not the legislature. Tsang’s address repeatedly called for “harmony”, but as defined by government, not by popular will, and proposed the creation of a “cadre” of political leaders to promote government policies. In short, he betrayed his preference for Plato’s republic over Jefferson’s, with rule by an elite of bureaucratic and entrenched business interests.

His hosts should also have something to say on trade issues, particularly as Hong Kong is shortly to host the key World Trade Organization ministerial meeting in December. They could remind him that for all its claims to being an open, competitive economy, Hong Kong lacks any competition laws and its domestic sectors are riddled with oligopolies and high-cost monopolies, privately owned but with close ties to Tsang’s “business friendly” administration. They may also have some concerns that Hong Kong’s Closer Economic Partnership Arrangement with the mainland could be at odds with its traditional commitment to offering a level playing field for all trade.

Some of his hosts will not need reminding that Tsang, a lifetime bureaucrat, has been involved in several huge property-related deals between the government and private interests which, for whatever reason, have bypassed normal competitive tendering procedures. He was also the architect of the government’s 1998 massive intervention in the stock market to shore up asset prices.

Link here.


The mayor of London is backing a campaign to entice Moscow’s oligarchs to bring their ill-gotten gains to his city. For a politician who once suggested that capitalism was responsible for more deaths than Hitler, Ken Livingstone is in the midst of a monstrous U-turn. Backed by “real enthusiasm from the mayor’s office”, the tourism quasi-NGO Visit London is engaged in a determined campaign to attract Russia’s super-wealthy. Advertising in high-end lifestyle magazines and running press junkets to the West End, marketing chiefs have their eye on the spending power of the Muscovite nouveaux riches. Livingstone’s weakness for oligarchs is in danger of turning Britain’s capital into the Sun City of the 21st century.

The commercial ties between England and Russia have a proud pre-history. In 1553, the Muscovy Company, England’s first joint-stock enterprise, was set up to trade cloth for Russian furs. Elizabethan entrepreneurs made numerous trips to Ivan the Terrible’s court at Moscow while Russian merchants began to arrive in London in large numbers from the later 17th century. Famously, in 1796, Peter the Great toured London incognito to pick up architectural and planning tips for his new city of St Petersburg.

During the following two centuries, London also provided a refuge for Russia’s intellectual elites and political dissidents. Alexander Herzen made the capital a base for anti-tsarist propaganda. The anarchist Michael Bakunin exploited the city’s freedoms to agitate for European revolution. In 1907, London hosted the congress of the Russian Social Democratic party, complete with Lenin, Trotsky and Stalin.

Now, in place of intellectuals and radicals, Britain has become an offshore depository for Russia’s robber barons. Those who plundered the natural wealth of the crumbling Soviet Union during the ‘90s “piratization” have ploughed their ill-gotten gains into London life. Money that should be in Russian pension funds, public salaries and supporting infrastructure is paying for private schools, chauffeurs and chefs in southern England. It is estimated that Russia has 27 billionaires and hundreds of paper millionaires. Most, it seems, are making their homes in London. Indeed, when the future history of the capital is written, the early 21st century will surely be known as “the Russian epoch”.

What attracts these plunderers is a witche’q brew of favourable tax planning, the financial services sector, and a stable of corporate law firms for the endless litigation that pursues them. They also like the history and heritage of Britain along with high society’s no-questions-asked approach to fabulous new money. The Rothschilds, the Flemings, even the Palmer-Tomkinsons are falling over themselves to get into bed with the oligarchs. Aside from international footballers, top-flight libel lawyers and fine sushi restaurants, it is hard to see what greater good the money is doing – not least since the chancellor has steadfastly refused to reform non-domicile tax law. Where are the businesses, cultural patronage or charitable institutions from this new Russian community?

This arrival of the super-wealthy in London is further distancing the capital from the rest of the country. A recent study by the University of Sheffield of the 2001 census concluded that Britain was being split in half.“qTo the south is the metropolis of Greater London, to the north and west is the ‘archipelago of provinces’ – city islands that appear to be slowly sinking demographically, socially and economically.”

More important, the riches that the south-east’s service economy is siphoning off represent a grotesque theft of assets from the Russian people. The 1990s saw a legal ram raid of Russian resources that sent life expectancy and GDP rates plummeting. What was billed as free-market economics was in fact a quick-fire sale of a nation’s wealth to a handful of well-positioned state apparatchiks. Gas, oil and minerals were flogged off at rock-bottom prices to Kremlin cronies. And like South Africa’s Sun City during the 1980s, London is growing fat off these immoral earnings with absolutely no regard for their provenance. During his time in office, Livingstone has been as much concerned with foreign policy as city politics. But when it comes to the oligarchs, he is curiously silent. If London is to be a world city, then it should have regard as to which parts of the world are picking up the tab.

Link here.


Millionaire wannabes will learn from the master as Donald Trump passes on his wisdom – for $25,000 a minute. The mogul takes the stage as the highlight of the Learning Anne’qs Real Estate Wealth Expo for a record-breaking $1.5 million fee. “I want information on how to get rich,” said Ethelia McKay, 42, an anesthetist from Long Island, at the Jacob Javits Center for the two-day event’s opening. “Donald Trump is definitely the man to get it from.” Big-name speakers inspiring dreams of wealth include Robert Kiyosaki, Barbara Corcoran and Tony Robbins, who spoke to 6,000 people yesterday. An additional 4,000 watched from big-screen TVs.

But The Donald is the main draw. After New York, he will appear at seven other Learning Annex events around the country, pocketing $12 million in all. “I live in the Trump World Tower,” said financial consultant Brian Anguili, 40, of the Trump development near the United Nations complex. “Maybe in the next 10 years, there’ll be a tower in my name. The wealthiest people in the world have gotten wealthy from real estate. I want to know how they did it.”

Visitors paid from $49 for floor passes to $499 for VIP passes that pushed them to the front of the line for talks and classes. Amir Zakikhani, 25, an entrepreneur, traveled from Philadelphia. “Everybody wants to be rich, and knowledge is power,” he said. “There are some incredible experts here who can give me that knowledge. If you listen to these, you can’t help but be wealthy.” Mary Maroney, 52, gave up nursing to chase her real estate dream in Brooklyn with business partner Marie Sayour, 53.

Link here.

What is he really worth?

In 1993, with his casinos in hock, most of his real estate holdings either forfeited or stagnant and his father slipping into the fog of Alzheimer’s disease, Donald Trump, at the age of 47, had run out of money. There were no funds left to keep him aloft, and as the bare-bones operation he maintained in Manhattan started to grind to a halt, he ordered Nick Ribis, the Trump Organization’s president, to call his siblings and ask for a handout from their trusts. Donald needed about $10 million for his living and office expenses, but he had no collateral to provide his brother and sisters, all three of whom wanted a guarantee that he would repay them. The Trump children’s anticipated share of their father’s fortune amounted to about $35 million each, and Donald’s siblings demanded that he sign a promissory note pledging future distributions from his trust fund against the $10 million he wanted to borrow.

Donald got his loan, but about a year later he was almost broke again. When he went to the trough the second time, he asked his siblings for $20 million more. His brother Robert Trump, who briefly oversaw Donald’s casinos before fleeing the pressure of working for him to take over their father’s real estate operation, balked. Desperate to scrape some money together, Donald tasked Alan Marcus, one of his advisers, to contact his brother-in-law John Barry and see if he could intervene with Robert and his other siblings. Mr. Marcus said that Mr. Barry successfully lobbied other members of the Trump clan and that another handout was arranged, with Donald agreeing again that whatever he failed to pay back would be taken out of his share of their father’s estate. “We would have literally closed down,” said another former member of the Trump Organization familiar with Donald's efforts to keep the company afloat. “The key would have been in the door and there would have been no more Donald Trump. The family saved him.”

Donald disagreed with this version of events, but Mr. Marcus and two other executives who worked closely with Donald all said the family’s financial lifeline gave the developer the support he needed to get through the rough waters separating his early years of overblown, overhyped acquisitions and the later years of small, sedate deals preceding his resurrection on “The Apprentice”. Both of Donald’s parents died during that time, he parried with Ivana Trump in a bitter divorce battle that hinged on properly valuing his dwindling assets, he remarried and divorced again, and then he did what anyone else in his situation would do when confronted with limited options - he ran for president of the United States.

Before Donald could get to Phase 2 of his career, he had to muscle his way through the dismantling of his business empire and a thorny financial restructuring with his bankers and bond holders that left him on the precipice of personal and corporate bankruptcy. As bankers who once fell over one another to throw money at him now lined up for their share of what was left over, Donald scrambled to hang on to whatever he could while maintaining his facade as America’s most savvy entrepreneur. And in terms of maintaining his popular mojo, Donald proved remarkably resilient. “When I was in trouble in the early 90’s, I went around and … openly told people I was worth minus $900 million,” Donald recalled. “And then I was able to make a deal with the banks.”

To survive a process as tortuous and unpredictable as a debt workout, however, requires a large dose of gumption. Donald had gumption in spades. “You’re out there alone. I mean, i’qs not fun,” he advised. “I went from being a boy wonder, boy genius, to this [expletive] guy who has nothing but problems.”

Although Donald’s brush with bankruptcy separated him from some of his showiest assets and from the banks whose loans had first puffed him up, his penchant for claiming billionairedom remains. To this day, he closely monitors his ranking on Forbes magazine’s annual list of America’s wealthiest individuals, the Forbes 400, and his ability to float above the wreckage of his financial miscues and to magically add zeroes to his bank account has ensured that he remains an object of fascination. But how much is Donald Trump really worth?

Link here.


Singapore has identified India and China as the “pace-setters” for the economic growth of other Asian countries. Outlining this world-view, Singapore’s Deputy Prime Minister and Coordinating Minister for National Security, S. Jayakumar, said that “the re-emergence of India will have profound implications for the global strategic landscape.”

Mr. Jayakumar told the Singapore Indian Chamber of Commerce & Industry (SICCI) at its 81st anniversary dinner that the businesses in the City-State should seize “the many opportunities” that India and China, as “the two rising economic powerhouses” in Asia, had opened up for the others. These opportunities were laced with the “competition” that was now “intensified” by the economic ascendance of India and China.

Profiling India, he said its “economy continues to record strong growth, while undergoing important structural adjustments.” While the first phase of reforms, initiated in 1991, “helped India achieve an annual growth rate of six to seven per cent,” the next phase, the centerpieces being “privatization and foreign participation”, would add to the “dynamism of the India’s economy.” Mr. Jayakumar cited the advantages of investing in India – “a well-established legal system, a high level of English-language proficiency, a large and highly-educated workforce, and a vast domestic market of consumers.” The icing on the cake, as seen from Singapore, was that India had, “within a short period of time, … become a global IT (information technology) hub and a premier destination to outsource ‘back-room’ and other administrative services for multi-national companies.”

Link here.

China, Singapore seeking better political ties.

Singaporean Prime Minister Lee Hsien Loong’s high-profile visit to China demonstrates the two countries are seeking political ties commensurate with their close economic relationship. Relations between China and Singapore chilled after Lee’s visit to Taiwan as deputy prime minister in July, 2004. But over the past few months, China-Singapore ties have been gradually repaired with Singapore’s repeated promise of adhering to the one-China policy and high-level visits between the two countries. Singapore is China’s biggest trading partner in Southeast Asia, with total trade reaching $26.7 billion last year, up 38% from the previous year.

Link here.


The Chief Minister of Gibraltar, Peter Caruana, told members of the legal and financial communities in London this week that his government is working to ensure the Rock will remain a competitive low tax jurisdiction for some time to come, with a thaw in relations between Gibraltar and Spain also promising a bright future for the local economy. Mr. Caruana explained that Gibraltar has diversified its product offering away from traditional brass plate and deposit services to new, more sophisticated areas, transforming the jurisdiction into a “truly onshore offshore international and European finance center”.

Despite the introduction of the European Savings Tax Directive in July this year, Mr. Caruana stated that Gibraltar’s banking industry continues to flourish, employing some 700 people and welcoming “important newcomers”. Meanwhile, he noted that the insurance sector has grown substantially in size in recent years with the number of locally licensed companies having grown to 45 from 13 in four years. According to Mr. Caruana, new legislation will allow Gibraltar to become a major player in the establishment of pan-European corporate pension schemes. He also revealed plans to launch a stock exchange, which will be backed by major European institutions.

The Chief Minister told the delegates that: “We will remain committed to the principle of ‘no’ or ‘low’ tax, and with the help of so many leading financial services institutions provide an environment for the safe and prosperous provision of financial services throughout the EU and the world.” Furthermore, Mr. Caruana noted a “significant thawing” in relations between Gibraltar and Spain which is likely to lead to new agreements allowing more extensive international air service connections with the Gibraltar Airport, and the removal of obstacles blocking the full use of telecommunications.

Link here.


Ending a tradition going back 175 years or more was always going to inflame passions. Now a key Tynwald vote could set the Isle of Man on a course to make history and even change the way the Island is seen in the world. The Queen’s representative in the Isle of Man has been known as the “lieutenant governor” since 1830 – although the title pre-dates that by many years. Now the title could be changed to the rather more pedestrian one of “Crown commissioner”. The final decision is in the hands of Her Majesty herself.

Traditionalists and modernizers took their sides in a lively debate in Tynwald. Michael MHK David Cannan insisted the change would “demean and belittle” the post while Transport Minister Phil Braidwood described the title of lieutenant governor as “archaic”. Clare Christian urged the use of the Manx equivalent “barrantagh y chrooin” in place of Crown commissioner. And Peter Karran (Onchan) said the issue should be left to the people to decide by way of a referendum – but added that he looked forward to the day when the Island would have a directly elected representative. The Department of Constitutional Affairs has previously said it could see no reason why this matter “could not be formerly progressed”. That is not to say the move will be approved. This is unchartered constitutional territory and will raise big questions about the Island’s relationship with the Crown if the request is refused.

Link here.


Americans are living longer and better than ever. The Census Bureau predicts the nation will have more than 1 million centenarians in 2050, up from 71,000 today. That is the good news. Now the bad: The cost of health care and retirement benefits of an aging population threatens to bankrupt the nation unless dramatic changes are made. The average American retires five years earlier than in 1950 and lives 12 years longer. This phenomenon – work less, collect more – has ripped a hole in the senior citizen safety net. The longer we live, the bigger the hole.

The money hole from living longer has been partly patched in the short-term by favorable demographics: Baby boomers, born in the nation’s 1946-1964 population explosion, are still working and paying taxes. But that is about to change. In 2008, the first boomer qualifies for Social Security at age 62. More important, in 2011, the first boomer turns 65 and qualifies for Medicare, the government health program for seniors.

The cost of longer life spans and medical breakthroughs puts the nation in a dilemma. The surprising thing about healthy seniors is that they do not save Medicare money. They might cost the program even more. Average lifetime medical costs after turning 65 are about the same – about $225,000 in 2005 dollars, of which Medicare pays $135,000 – no matter how long a person lives. But living longer through medical innovation – rather than by staying trim and not smoking – is very costly. The dirty little secret of public health finance is that cigarettes are a very cost-effective killer.

A large Rand study published in September estimated what the most promising medical advances might cost Medicare for every year of life added to patients. Unlike a private insurance company, Medicare has little control over what expensive new treatments it covers. It is legally required to pay for all beneficial medical care without regard to cost. Rand found that potential breakthrough treatments – from cancer vaccines to anti-aging compounds – are expected to be enormously expensive for the amount of time they add to life. To control Medicare costs, Congress might be forced to make life-and-death decisions about the benefits and costs of medical innovation. That could pit Medicare grandparents against taxpaying grandchildren. “People enjoying the fruits of improved health care aren’t the people paying for it,” economist Dana Goldman says.

The political clout of seniors will be tested as the cost of medical care grows. The outcome is uncertain because polls show that Americans – young and old – oppose every possible solution: raising taxes, cutting benefits or delaying retirement. The aging of 79 million baby boomers will make the political influence of the elderly even more potent. Social Security and Medicare created the formidable senior citizen constituency, says political scientist Andrea Campbell of the Massachusetts Institute of Technology. Before Social Security, the elderly were among those least likely to vote, she says. Today, seniors are the most likely to vote. In 2004, turnout was greatest among voters 65 to 74 and lowest among those 18 to 24. “Baby boomers are more affluent now than their parents were, but they haven’t saved as much,” Campbell says. “They have an enormous stake in Social Security and Medicare. The politics of the future will revolve very much around senior issues.”

Link here.


The Swiss application for EU membership, on ice since 1992, will not be withdrawn, the cabinet announced after a special meeting on Wednesday. A report on all the options regarding the EU, including membership, will be presented by next summer, to help decide the ultimate direction on Europe. Foreign minister Micheline Calmy-Rey said that the government was determined to maintain a “policy of active cooperation” in Europe. A purely defensive, fearful approach to Europe, always saying no and just wanting to keep the status quo, would not be in Switzerland’s interest, Calmy-Rey said.

Switzerland applied to join the EU in May 1992. Brussels put the application on ice in the same year after the Swiss population voted against joining the European Economic Area (EEA). As an alternative to membership, Bern has taken the “bilateral” route, concluding 16 agreements with Brussels in two separate rounds of negotiations. The cabinet decision indicates that EU membership is no longer a strategic objective of Switzerland, but a long-term option.

Link here.



Finance Minister Hans-Rudolf Merz has defended the Swiss tax system after the EC questioned low corporate tax rates in some cantons. Speaking at a Swiss Business Federation forum in Zurich, Merz rejected the idea of rigid tax harmonization with the EU. His comments follow suggestions from Brussels that the corporate tax regimes in cantons Zug and Schwyz, that encourage large foreign companies to set up holdings, do not comply with the 1972 Free Trade Act.

“For Switzerland, tax competition is not only a theoretical concept. It represents one of the constitutive elements of our system of state and self-understanding,” said Merz. “Competition ensures diversity and quality of supply, innovative entrepreneurship, and low prices for consumers. “This forces the policies and administration of competing locations to offer an attractive combination of public services and a tax burden that is as low as possible.” Merz said he recognized criticisms of Swiss business tax havens, but dismissed the concept of harmonizing Switzerland’s tax system with other countries.

“Tax competition is sometimes claimed to trigger a cut-throat tax cutting spiral, which may lead to a creeping deterioration of services in the public sector,” he said. “Efforts therefore exist to harmonise taxes internationally and to limit tax competition. Such a conclusion defies logic – it has not been proven. The realpolitik alternative to tax competition is a tax cartel. Cartels, however, are seldom advantageous for the citizen.” Merz added that the ability to attract business by setting low tax rates is essential if Switzerland is to compete with the larger economies of neighboring countries

Link here.

EU questions Swiss cantonal tax system.

A letter sent to the Swiss Mission in Brussels pointed out that certain parts of the Swiss corporate tax regime “may be incompatible” with Switzerland’s obligations under the free labor accord with the EU. “The legislation in question, that is enforced in Zug and [canton] Schwyz, is said to grant fiscal advantage to undertakings for … economic activities taking place outside Switzerland,” the letter stated.

Guido Jud, head of corporate tax in canton Zug, said that he was “surprised” by the EU's viewpoint. “The rules on taxation in Switzerland have not changed recently so we do not see why, in 2005, there should be suddenly be a problem,” he stated. In Switzerland, cantons are free to set their own tax rates within the framework of the 2001 Tax Harmonization Act. This allows cantons to compete to attract foreign companies. Currently, the tax rate for companies in Zug ranges from 14% to 17%.

Link here.


Just two years ago, Congress was poised to eliminate the hated estate tax permanently. Today, however, several U.S. Senators are using their own wasteful spending habits to justify retaining the tax. In the eyes of these Senators, budget deficits are never the result of too much spending, but rather too little taxing. They cannot imagine giving up even the tiny fraction of federal revenues raised by the estate tax. Why is a 1% revenue cut unthinkable to these lawmakers, while annual 3% or 5% spending increases are considered business as usual? To answer this question, look no further than the transportation bill passed last week in the Senate. It is perhaps the most pork-filled, wasteful appropriations bill passed in years. The bottom line is that spending money is what keeps these Senators in office. They will not stop pork spending because the American voting public rewards them for it.

The estate tax, more accurately known as the death tax because it is levied when a taxpayer dies, confiscates anywhere from 37% to 55% of a individual’s assets. While these rates are unconscionable, the death tax also represents an especially galling form of double taxation. Americans already pay federal and state income taxes throughout their working lives. They pay income and capital gains taxes on money they save and invest. They pay local property taxes on their homes. They pay various sales taxes whenever they buy something. They even pay steep federal taxes on gasoline and telephone use. Yet after a lifetime of burdensome taxes, the death tax punishes Americans one last time simply because they worked hard, saved, and invested to pass something on to their families.

The tired argument that the estate tax only affects the rich simply is false. Many of my constituents are farmers, ranchers, and small business owners. They are hardly rich, but some of them have built up valuable businesses they would like to pass on to their children. Yet when they die, their children rarely have the liquid cash needed to pay the death tax bill. Often the business must be sold or divided to raise money for the IRS. Many family farms across this country have been bought by large corporations because of the estate tax.

Ultimately, the argument against the death tax is a moral one. People should not be punished for working hard, saving, and building wealth. Our society should respect the most basic property right, namely the right to dispose of one’s property as one chooses. The American dream is based on making a better life for one’s children, despite the empty rhetoric of the class-warfare politicians in Washington. Building wealth is not sinister, it is admirable. Our tax rules should encourage the decidedly American virtue of saving for the future.

Link here.


With President George W. Bush’s Tax Commission about to issue its recommendations – opening up a rare opportunity for fundamental tax reform – we would do well to remember one of the iron rules of economics: whatever we tax, we will get less of and whatever we do not tax, we will get more of. In other words, we should tax what is bad, not what is good.

By this logic, America’s current tax system is as wrong-headed as it is backward. It discourages savings, job creation and higher wages, while encouraging energy consumption, waste and environmental degradation. Sadly, the Tax Commission has decided to ignore many of these perverse incentives. This is unfortunate, because reversing them could not only help to solve many of our nation’s most pressing problems, but also yield a tax system that better reflects American values.

Link here (subscribers only).


KPMG International, the global professional services group, has shrugged off a scandal over questionable tax shelters in the U.S. to report a 16.4% increase in combined revenues in 2005. The “big four” accountancy firm reported provisional revenues of $15.65 billion in the year ending September 30, 2005. The group controls a global network of professional services firms in 148 countries, employing nearly 94,000 people world-wide.

KPMG’s US arm recently agreed a £465 million settlement with the U.S. government after admitting selling “unlawful” tax shelter schemes which deprived the public purse of billions of dollars. Mike Rake, London-based chairman of KPMG International, has admitted to being “embarrassed” and “ashamed” by the affair, but has also stressed that the practices constituted only a “small, non-core” part of the U.S. firm’s business. Rake said the firm had had “an exceptional year in a difficult regulatory environment”, with increased business activity and gains in market share.

Last week, KPMG member firms announced the appointment of 594 new partners in 55 countries or jurisdictions around the world. It also revealed new appointments in its global leadership team. Rake also claimed that the recent mergers involving KPMG member firms in Japan and France had been a roaring success, with the firm strengthening its leading position in both regions.

Link here.


Anti-tax crusader Irwin Schiff and an associate were found guilty of charges including conspiracy, tax evasion and tax fraud that could get each of them decades in federal prison and millions of dollars in fines. Schiff, 77, who argues that paying taxes is voluntary, was handcuffed and led from U.S. District Court after a jury found him guilty of all 13 charges. “There’s no reason to put me in jail,” Schiff told Judge Kent Dawson, whose patience was tested while Schiff served as his own lawyer during the 5-week trial. “I’m not a flight risk. I would much rather use the time to prepare an appeal,” said Schiff, author of books with titles referring to a “federal tax mafia” and the “income tax hoax”. The judge could sentence Schiff to up to 43 years in prison and up to $3.25 million in fines, plus unspecified sanctions for outbursts during the trial. He ordered Schiff jailed without bond until sentencing Jan. 20.

Co-defendant Cynthia Neun, 52, was found guilty of 15 of 16 charges, including conspiracy, tax evasion, aiding in the filing of fraudulent tax returns, Social Security disability fraud and theft of government property. She faces up to 50 years in prison and $3.3 million in fines. Dawson set Neun’s sentencing for Jan. 27, and ordered her jailed pending a bail hearing. Attorney Michael Cristalli said Neun will appeal. “This case is fraught with error,” Cristalli said outside court. Neun should have been tried separately, he said. Another co-defendant, Lawrence Cohen, 65, was convicted of one count of aiding in the filing of fraudulent tax returns and acquitted on three other counts of the same charge, and of conspiracy.

Schiff contends that the federal tax code does not require taxpayers to pay income tax. He disputes the government’s definition of income, and argues that the IRS has no authority to seize property. He promoted his theories in lectures, radio appearances and books, including The Federal Mafia: How the Government Illegally Imposes and Unlawfully Collects Income Taxes and The Great Income Tax Hoax: Why You Can Immediately Stop Paying This Illegally Enforced Tax. The government obtained an injunction banning Schiff, Cohen and Neun from selling the books and tax advice at Schiff’s Las Vegas business, Freedom Books.

Federal prosecutors portrayed Schiff as con man who scammed people into believing they could dodge their tax liability. They said the scheme was responsible for nearly 5,000 tax returns that fraudulently reported no income and cost the government about $56 million from 1999 to 2001. The government said Schiff failed to report income on federal tax returns from 1987 to 2002, and evaded payment of $1.3 million in taxes, penalties and interest from 1979 to 1985.

Link here.



“So much to do, so little time!”, George Bernard Shaw is said to have remarked on his death-bed. While the same degree of pre-destiny might not be as urgent for expatriates leaving postings after many years overseas as it was for one of history’s most famous playwrights, there are still many things to consider before final departure. How many of us give sufficient time to the financial areas of our lives that could possibly affect us once we land back on the native soil we left 5, 10, or even 20 years ago?

There is much to consider. The fortunate may have access to their companies’ lawyers, accountants, tax specialists and consultants. For the vast majority, there will not be much more than a final “Bon Voyage” party, a slap on the back and good luck, before everyone departs early once the free drinks have run their course. For the experienced expat who has taken the time to structure his financial affairs, the implications of the journey home are of no concern. For less experienced professionals or those who have not considered the consequences of returning to the old tax environment, the potential costs to them or their loved ones who stand to benefit from their career earnings loom large.

In which case, it is a good idea to examine the potential dangers now, face them and be prepared rather than find yourself uttering the words “If only I …” once back within the bounds of home-country revenue legislation. Solutions are available to legally avoid the taxman’s grasp, not evade duty-bound commitments. There is no one rule for all; each nationality has a different set of rules. For example, American expats will need different financial advice than British, Scandinavian or Dutch nationals. One thing for sure is that it is important for those returning home to consider flexibility in financial structures should you change your mind or long-term plans. We cover some of the questions that you may wish to ask your adviser to give you peace of mind.

Link here.


A Superior Court judge in Essex County, New Jersey has frozen $1.4 million in funds that authorities say are linked to an Internet securities scam involving a fictitious company that cheated investors across the globe out of millions of dollars. Judge Donald J. Volkert Jr. granted a request by state Attorney General Peter Harvey to freeze the money contained in four Merrill Lynch accounts held in the names of various individuals and corporate entities. Volkert also ordered the holders of those accounts to appear at a Nov. 30 hearing. At that hearing, the judge will decide whether to order the account holders to disclose the source of money contained in 13 Merrill Lynch accounts in their names and whether to freeze those funds, which total more than $70 million. The Attorney General’s office and the Bureau of Securities have already seized $620,000 in funds in accounts in Panama and the Cayman Islands.

Using a professional-looking Web site, the fictitious company called Heritage Financial Inc. made false offers to buy low-cost stock shares at inflated prices, according to the Attorney General’s office. Victims, many of them living outside of the U.S., were asked to first wire thousands of dollars in upfront transaction fees to a Tampa, Florida, Bank of America account. The stock purchases were never completed, according to the AG’s office. Heritage directed skeptical clients to Web sites and phone numbers of supposed international regulatory agencies that vouched for the company. But those sites, too, were fabricated. The phone numbers, complete with out-of-state area codes, were actually routed back to Heritage staffers, authorities said.

Link here.


The U.S. Senate has adopted an amendment championed by Sen. Carl Levin (D-Michigan) that would bar the award of future contracts through several government departments to U.S. companies that have set up headquarters offshore to avoid American taxes. “We should not reward the tax haven games played by U.S. companies who want to enjoy U.S. benefits without paying their fair share of U.S. taxes,” Levin commented. “It is unfair to the U.S. companies that pay their taxes and have to compete with these tax scofflaws, and it is unfair to all the other honest taxpayers forced to make up the difference,” he added.

The Levin amendment has been included in the Senate bill funding the Departments of Transportation, Treasury, Housing and Urban Development, and other independent agencies for the 2006 fiscal year. Levin continued, “The companies targeted by this amendment claim to have moved their headquarters to a tax haven when, in reality, their primary offices and production or service facilities remain right here in the U.S. There is no reason to reward this tax dodge or companies that have renounced their U.S. corporate citizenship by giving them new federal contracts that are paid for with taxpayer dollars.”

The ban would be similar to the ban that already applies to Department of Homeland Security (DHS) contracts. A Levin amendment that was signed into law last year strengthened the DHS ban.

Link here.


One of Scotland’s largest privately owned independent financial advisers is to establish a base in Monaco to serve some of the world’s wealthiest clients. The move into the principality is part of Stewart Asset Management Group’s plans to double its turnover to £5 million this year. It aims to establish itself as a niche player in investment management and tax mitigation structures for high net worth individuals. Monaco is seen as a big potential market by the company because of the high number of wealthy British expatriates who live there, including some of its existing clients.

The principality’s status as a tax haven is legendary. The business climate remains highly confidential and discreet, and there is no income, capital gains or inheritance tax in Monaco. Of primary concern for these individuals, however, is that the inheritance tax liability remains on all of their worldwide assets outside of the principality. Monaco is ideal as an investment haven for clients who can afford to set millions aside.

Stewart Asset Management also plans to use forthcoming changes in EU legislation to develop its products and services to clients across the 25 member states, and sees Monaco as an ideal base for this. The Glasgow-based firm has just launched its operation in the principality by flying out more than 20 clients, associates, accountants and financial experts for a three-day event there. During the trip it revealed details of a highly tax-efficient structure primarily involving the use of a new EU directive which could allow substantial benefits.

Link here.


A week or two ago much was made of the fact that the OECD through its Financial Action Task Force (FATF) had informed the relevant bodies that The Bahamas was no longer being monitored by the FATF, for now. No word was mentioned, however, about leveling the playing field, a position that the Minister of State for Finance Senator James Smith had said had to be a starting position for negotiations between The Bahamas and the high-tax regimes that operate through OECD about any changes or agreements that would be made between The Bahamas and other countries.

The reality is, however, that the field will never be level and it is in recognition of this fact that Marshall J. Langer in a recent presentation at a Bahamas Financial Services Board-sponsored seminar made some suggestions on how the jurisdiction could retain its competitive edge without losing face. According to Mr. Langer, a noted specialist on taxation regimes, it is possible for countries like The Bahamas to propose win-win arrangements between what he terms “high-tax countries and no-tax countries”.

Mr. Langer is proposing that countries like The Bahamas, where financial centers are under attack from the OECD, should look at what he calls “limited revenue-sharing tax arrangements”. These arrangements would apply only to “bona fide resident individuals but not to companies or other entities”. And Mr. Langer’s proposal applies only to individuals because much of the financial services is driven by high net worth individuals who are particularly keen about keeping as much of their money as legally possible for their use as oppose to having it taken away by onerous tax schemes.

Mr. Langer pointed out that it was critical that the stakeholders in both the public and private sectors take the initiative and approach countries within the OECD like Austria and Iceland, and establish arrangements based on his suggested win-win model. The model, which he calls the Limited Revenue-Sharing Tax Arrangement (LRSTA) has certain characteristics, not least of which is “mutual trust and confidence” between the two countries, which would eventually evolve into more comprehensive tax treaties or agreements. Mr. Langer notes that it would be “less comprehensive than a typical tax treaty” but at the same time provide more benefits to the contracting parties than the usual tax exchange agreement (TIEA) one of which The Bahamas has with the USA. The importance of countries like The Bahamas seizing the initiative and pushing their agenda becomes readily apparent upon viewing the more critical LRSTA components.

Link here.



The IRS has asked a San Jose federal judge for access to eBay’s PayPal customer records as part of a nationwide probe into whether scofflaws are using offshore credit card accounts to evade paying income taxes. In a complaint filed in U.S. District Court earlier this week, the federal government is seeking permission to serve a “John Doe” summons on San Jose-based PayPal as part of an investigation into credit card holders who are exploiting bank secrecy laws in dozens of foreign countries. Federal investigators said in court documents that they are seeking records from PayPal because they have no other way to track down the suspected tax evaders who may be using the online payment service to transfer money illegally.

The federal government estimates that $40 billion in tax revenue is lost every year as a result of schemes involving credit cards linked to foreign tax havens. Government lawyers argued that they have served similar papers on credit card companies such as Visa and MasterCard, but investigators say they need more information from PayPal to pin down potential violators. The complaint said the investigation spans from Jan. 1, 1999, to Dec. 31, 2004. PayPal spokeswoman Sara Bettencourt said PayPal generally cooperates with law enforcement when they seek assistance in particular cases.

Link here.


The automated system whereby FinCEN and law enforcement request and receive information from financial institutions for use in terrorism and money laundering cases is enduring a shutdown – caused by the September 23 “cyberjacking"” of FinCEN’s outside e-mail list. Three weeks later, FinCEN has not been able to bring the system back up. A question is whether the substitute (paper-based?) system provides the same quality of information in the same timeframe. The automated system had provided law enforcement with real money laundering and terrorist financing case leads.

Link here (scroll down).


New federal wiretapping rules forcing Internet service providers and universities to rewire their networks for FBI surveillance of e-mail and Web browsing are being challenged in court. Telecommunications firms, nonprofit organizations and educators are asking the U.S. Court of Appeals in Washington, D.C., to overturn the controversial rules, which dramatically extend the sweep of an 11-year-old surveillance law designed to guarantee police the ability to eavesdrop on telephone calls. The regulations represent the culmination of years of lobbying by the FBI, the Justice Department and the Drug Enforcement Administration, which have argued that “criminals, terrorists and spies” could cloak their Internet communications with impunity unless police received broad new surveillance powers. The final rules, published this month by the FCC, apply to “any type of broadband Internet access service” and many Internet phone services.

“The concern is that what is being proposed is inordinately expensive to achieve the results that the FCC and the Department of Justice would like to secure,” said Sheldon Steinbach, general counsel to the American Council on Education, which filed its legal challenge late Monday. The rules are set to take effect in April 2007. Another legal challenge from businesses and nonprofit groups is impending. “The FCC simply does not have the statutory authority to extend the 1994 law for the telephone system to the 21st century Internet,” said Marc Rotenberg, director of the Electronic Privacy Information Center, which is joining the second challenge. Also participating are the Center for Democracy and Technology, Pulver.com, the Electronic Frontier Foundation, and the telecommunications trade group CompTel.

The 1994 law, called the Communications Assistance for Law Enforcement Act or CALEA, required telephone companies to rewire their networks and switches to guarantee ready eavesdropping access to police. That prospect dismays privacy advocates and telecommunications providers who worry about the expense and argue that Congress never intended the law to apply to broadband links. A House of Representatives committee report prepared in October 1994 says CALEA’s requirements “do not apply to information services such as electronic-mail services; or online services such as CompuServe, Prodigy, America Online or Mead Data; or to Internet service providers.”

The new regulations also are alarming Internet phone service providers. Jonathan Askin, general counsel to Voice over Internet Protocol (VoIP) firm Pulver.com, said that his company is not directly implicated by the regulations because it currently offers only peer-to-peer conversations rather than links to the traditional telephone network. The new rules cover VoIP services that provide a “capability for users to receive calls from and terminate calls” to the phone network. But that regulatory forbearance may vanish in the future, Askin warned. “From a forward-looking policy perspective, I think the FCC has opened the door to regulating the entire Internet,” he said.

Link here.

Grandiose schemes for electronic eavesdropping may hurt more than they help.

Whom do you trust? If you are a policeman, you trust the police. How much information is enough? When it comes to the electronic gathering of intelligence information, it appears that no amount of information is enough. These two concepts have collided in America with the result that creating the very capability of gathering electronic intelligence is putting all of us in greater danger. The supposed cure may be worse than the disease. Maybe – and only maybe – we know a little more about what the bad guys in our society are doing, but it is coming at what might be a horrible cost. And a big part of the problem is that if you are a policeman, you trust the police.

The FBI administers the Communications Assistance to Law Enforcement Act (CALEA), which was passed by Congress in 1994. CALEA was a response to advances in digital communications. It was a way for law enforcement and intelligence agencies to go beyond old-fashioned phone taps and listen in on mobile phone calls, pagers, the Internet and any other form of electronic messaging that might be used by enemies of the state. CALEA made the phone companies and pager companies and Internet companies responsible for building into their equipment the capability to tap all types of communications on the order of a judge or – in the case of foreign surveillance – of the U.S. Attorney General. Every telephone switch installed in the U.S. since 1995 is supposed to have this surveillance capability, paid for, by the way, with $500 million of your tax dollars. Not only can the authorities listen to your phone calls, they can follow those phone calls back upstream and listen to the phones from which calls were made. They can listen to what you say while you think you are on hold. This is scary stuff.

But not nearly as scary as the way CALEA’s own internal security is handled. The typical CALEA installation on a Siemens ESWD or a Lucent 5E or a Nortel DMS 500 runs on a Sun workstation sitting in the machine room down at the phone company. The workstation is password protected, but it typically does not run Secure Solaris. It often does not lie behind a firewall. Heck, it usually does not even lie behind a door. It has a direct connection to the Internet because, believe it or not, that is how the wiretap data is collected and transmitted. And by just about any measure, that workstation does not meet federal standards for evidence integrity.

And it can be hacked … and it has been. Israeli companies, spies, and gangsters have hacked CALEA for fun and profit, as have the Russians and probably others, too. They have used our own system of electronic wiretaps to wiretap US, because you see that is the problem: CALEA works for anyone who knows how to run it. Not all smart programmers are Americans or wear white hats. We should know that by now. CALEA has probably given up as much information as it has gathered. Part of this is attributable to poor design and execution, part to pure laziness, part to the impossibility of keeping such a complex yet accessible system totally secure, and part because hey, they are cops, they’re good guys. Give ‘em a break. Have a donut.

No sane person is in favor of terrorism or lawlessness. But at a time when intelligence agencies are under fire for being not very intelligent, when our leaders are sometimes in too big a hurry to cast blame and take credit, we are building huge information gathering systems that we cannot completely control, we cannot completely validate, that can be turned against us by our enemies, and that can ultimately be used to justify, well, anything. It might be a good idea to think twice about this before we shoot ourselves in the foot.

Link here.


Federal law enforcement attempts to use cell phones as tracking devices were rebuked twice this month by lower court judges, who say the government cannot get real time tracking information on citizens without showing probable cause. This summer, Department of Justice officials separately asked judges from Texas and Long Island, New York to sign off on orders to cellular phone service providers compelling them to turn over phone records and location information – in real time – on two different individuals. Both judges rejected the location tracking portion of the request in harshly worded opinions, concluding investigators cannot turn cell phones into tracking devices by simply telling a judge the information is likely “relevant” to an investigation.

In the Long Island case, the DoJ asked to record the location of the cell towers that handled a call using information in a phone’s “control channel”, which is separate from the voice channel used in a mobile telephone call, which would give only a rough approximation of a user’s locations and movement. In the Texas case, the government sought to capture information regarding the strength, angle and timing of the caller’s signal measured at two or more cell sites – data that might allow investigators to pinpoint a person’s location using triangulation.

Magistrate Judge James Orenstein of New York handed down his opinion the same day as the Electronic Privacy Information Center released documents acquired in a Freedom of Information Act lawsuit, which showed the FBI had repeatedly violated its own rules about surveillance of American citizens. The DoJ applied for the real time cell tracking information alongside orders to install so called “pen registers” and “trap and trace devices” which let investigators immediately learn the dialing information of incoming and outgoing calls. These orders are relatively easy for the government to get since the Supreme Court ruled that there is no expectation of privacy in the phone numbers a person dials, and federal law requires judges to issue the orders so long as law enforcement promises the information will likely be relevant. The government cited another law, the Stored Communications Act, to argue those devices could be also used to capture the location-focused information.

Kevin Bankston, an attorney at the Electronic Frontier Foundation, which filed a friend of the court brief (PDF file) in the New York case, says the Justice Department may have been using cell phones to track people for a long time, since judges typically do not publish opinions on such orders. “This is a true victory for privacy in the digital age, where nearly any mobile communications device you use might be converted into a tracking device,” Bankston said in a statement. “Judges are starting to realize that when it comes to surveillance issues, the DoJ has been pulling the wool over their eyes for far too long.”

Link here.


All U.S. passports will be implanted with remotely readable computer chips starting in October 2006, the Bush administration has announced. Sweeping new State Department regulations say passports issued after that time will have tiny RFID chips that can transmit personal information including the name, nationality, sex, date of birth, place of birth and digitised photograph of the passport holder. Eventually, the government contemplates adding additional digitized data such as “fingerprints or iris scans”.

Over the last year, opposition to the idea of implanting RFID chips in passports has grown amidst worries that identity thieves could snatch personal information out of the air simply by aiming a high-powered antenna at a person or a vehicle carrying a passport. Out of the 2,335 comments on the plan that were received by the State Department this year, 98.5% were negative. The objections mostly focused on security and privacy concerns. But the Bush administration chose to go ahead with embedding 64KB chips in future passports, citing a desire to abide by “globally interoperable” standards devised by the International Civil Aviation Organization, a UN agency. Other nations, including the UK and Germany, have announced similar plans.

The State Department claims it has addressed privacy concerns. The chipped passports “will not permit ‘tracking’ of individuals”, the department said. “It will only permit governmental authorities to know that an individual has arrived at a port of entry – which governmental authorities already know from presentation of non-electronic passports – with greater assurance that the person who presents the passport is the legitimate holder of the passport.” To address citizens’ concerns about ID theft, the Bush administration said the new passports will be outfitted with “anti-skimming material” in the front cover to “mitigate” the threat of the information being surreptitiously scanned from afar. It is not clear, though, how well the technique will work against high-powered readers that have been demonstrated to read RFID chips from about 160 feet away.

Privacy advocates said the anti-skimming device was a decent start. But if the cover of the passport happens to be open, all bets are off, said Bill Scannell, a privacy advocate who founded the site RFIDkills.com. “They’ve built little baby radio stations into peoples’ passports and covered it with concrete but when the little hatch is open, you can still hear the music. It’s better than nothing, but why take this risk?”

Link here.

RFIDs fleece blue-collar dollars.

Wal-Mart said its fast-growing use of radio-transmitting inventory tags has helped boost sales by keeping shelves better stocked with key merchandise. The use of RFID, or radio-frequency identification tags, has reduced out-of-stock merchandise by 16 percent at the company’s stores that have begun to use the technology over the past 12 months. Wal-Mart has been able to restock RFID-tagged items three times as fast as non-tagged items. Earlier this year, a formatting standard was agreed upon for an electronic product code, or EPC, to replace the old UPC bar code, clearing the way for mass participation by manufacturers of all kinds. Suppliers also have become more enthusiastic about the tags as their price has dropped, now selling for between 10 and 30 cents on average, compared with 20 to 50 cents a year earlier.

The retailer now has more than 130 major suppliers shipping merchandise to its distribution centers with RFID tags attached, and expects to add another 200 suppliers to the list by January, with about 1,000 stores and warehouses ready to receive their tagged goods. The company continues to expand its use of the technology despite pockets of resistance from consumer-privacy groups. A group organized by CASPIAN, or Consumers Against Supermarket Privacy Invasion and Numbering, picketed a Wal-Mart supercenter in Dallas, protesting Wal-Mart’s tagging of printers and document scanners from Hewlett-Packard being sold at the store. “This will make objects – and the people wearing and carrying them – remotely trackable,” said Katherine Albrecht, a spokeswoman for the consumer group. “We have rock-solid evidence that they are already devising ways to exploit that potential.”

Links here and here.



The recent Ibero American summit in Spain (a gathering of Spanish and Portuguese-speaking leaders) has been dominated by discussions about Cuba and, more widely, by the issue of human rights. An official statement was put out condemning the U.S. “blockade” of Cuba. Cuban critics have reacted furiously, denouncing Castro’s human rights violations and the summit’s failure to address this question. It is not unusual for human rights to polarize opinion and political leaders. The U.N Commission on Human Rights, controlled by exquisite human rights violators, is a case in point. In the Western Hemisphere, we know only too well how the issue of human rights can be caught up in an ideological crossfire that is of little help to those who suffer at the hands of brutal state security apparatuses or even of some democratic governments for whom majoritism is a convenient cover under which they persecute, incarcerate, maim, or kill minorities and critics.

With notable exceptions, the left and the right have tended to espouse a “hemiplegic” notion of human rights (to borrow French writer Jean-Francois Revel’s apt adjective). The left denounced Augusto Pinochet in Chile and Alfredo Stroessner in Paraguay, but fails to do the same with Fidel Castro. The right points a finger at Castro’s appalling human rights record but turned a blind eye to the elimination of thousands of people at the hands of the Argentine junta in the late 1970s and early 1980s, and backed Alberto Fujimori in Peru while the “Colina” death squad went around killing students and ice-cream vendors for suspected links to Shining Path that turned out to be untrue.

To make matters worse, the issue of human rights usually gets mixed up with the question of foreign policy towards the country suspected of violating them. Again, inconsistency is the norm. The discussion about human rights, therefore, is a discussion between those, on the left and the right, for whom the end justifies the means and therefore legitimizes the use of state force against peaceful individuals, and those for whom the rights of an individual take precedence over the government’s aims and interests.

One essential problem with the issue of human rights has been the difficulty, on the part of the left, to understand that property rights are at the core of that very notion. Ultimately, the “right” a person has not to be violated is the property he or she exercises over his or her body (by extension, a person should enjoy the “right” not to have his or her possessions expropriated through outright violence or distributive compulsion). And the right has had a hard time understanding that notions such as “free markets” and “free enterprise” are meaningless if the government concentrates power around it to such an extent that society is an autocratic command system in which human rights are conditional on the government’s plans. Sadly, Ibero American leaders at the summit seemed quite unconcerned with these important truths.

Link here.


The American Civil Liberties Union commended lawmakers from both sides of the aisle, and in both chambers of Congress, for calling for modest reforms to the Patriot Act. In bipartisan “Dear Conferee” letters addressed to members of Congress ironing out the differences between the House and Senate Patriot Act reauthorization bills, 163 members of the House and 25 members of the Senate called for the adoption of the Senate version.

“The Senate’s requirement of a factual connection to a suspected terrorist – before the confidential records of ordinary Americans and of American businesses are turned over to the FBI – is just common sense. In addition to the ACLU, groups like the American Conservative Union and the Chamber of Commerce, among many others, have insisted on this and other modest reforms that help ensure that we are both safe and free,” the letter read in part.

Link here. Bill of Rights readings during 4th anniversary week of signing of the USA Patriot Act planned in Kansas City – link.


There has been much wailing and gnashing of teeth among conservative pundits over George W. Bush’s nomination of Harriet Miers to the Supreme Court, and understandably so. Miers is, for all practical purposes, a blank slate. Those who trust Bush, such as James Dobson, can project their faith in him onto her. Those who do not, including many who just a year ago were firmly in the Bush camp, fear that she may turn out to be another David Souter, the quite liberal justice appointed by a previous, ostensibly conservative President George Bush on a “trust me” basis.

For the latter the argument inevitably comes down to this: Is Harriet Miers a strict constructionist? That is, will she read and interpret the Constitution as written and as intended by its authors, or will she, as a loose constructionist, consider it a “living document,” able to be bent and shaped to suit her own opinions as to how the country ought to be governed?

The real question, however, is: Does George W. Bush really want strict constructionists on the federal bench? (Yes, yes, I know he says he does, but he has also said he is in favor of smaller government and opposed to nation-building by the U.S. military, so his words are of little comfort in and of themselves.) For that matter, do conservatives really want strict constructionist judges, either? The answer to both is a resounding “No!”

If Harriet Miers were a strict constructionist, she would not likely be counsel to one of the most liberal presidents in recent memory – and that same president would not dare make the mistake of putting her on the Supreme Court, where she might very well find him and his entire political party in violation, many times over, of the Constitution. (The same holds true for Chief Justice John Roberts, who appears to be conservative mainly in the sense that he won’t rock the boat.) Both Bush’s admirers and his left-wing detractors need not fear Miss Miers, either. She will not harm one scale on their beloved Leviathan.

Link here.


In the next few years of the George W. Bush administration, it is almost certain that there will be a number of contentious battles between Democrats and Republicans and between the White House and the U.S. Senate over certain federal court nominees. While the issues will appear to be substantive and far-reaching – and no doubt they are in the present-day U.S. – one needs to examine another perspective concerning the federal courts, one that demonstrates how far this country has drifted from its original moorings in liberty. Before the 20th century, the federal courts did not play much of a role in the daily lives of Americans. It is difficult to comprehend just how decentralized government power was in this country at one time, for even the structure of the various court systems ensured that the federal courts would not have much effect on the average person.

That state of affairs no longer exists. While the state courts still handle the bulk of criminal cases and lawsuits, federal courts have grown both in the size and in the numbers of cases heard. A federal criminal code that once had three crimes (piracy, treason, and counterfeiting) now contains thousands, and it is no exaggeration to say that most Americans at one time or another have violated a federal law for which there are serious criminal penalties. The violations mostly are made in ignorance, and the size of the U.S. population relative to what the federal courts can handle means that the vast majority of people will not be arrested or charged with anything. However, the huge numbers of potential federal “criminals” also mean that a large number of people who have no idea they have violated a federal law will be shocked to find themselves in the dock. On top of that, the civil dockets have metastasized, as the number of lawsuits filed in federal court by private individuals, businesses and corporations, and the government itself has expanded exponentially.

The federal courts did not grow on their own, nor does the U.S. Constitution create a large role for them. That the federal courts are the major players in the system of justice in this country is testament to the unconstitutional usurping of power by the three branches of the federal government. This development did not occur out of logic or necessity. The federal system did not grow simply of its own accord. Instead, the Leviathan we see today has come about because groups of intellectuals and lawyers actively sought to change the very meaning of law in the U.S. It was and is a sorry episode of U.S. history, one of many such affairs that have turned the nation’s legal system from a marvel to a slough of treachery, deceit, and unpredictability. The system of justice that once protected the innocent and held contracts and private property to be near-sacred entities, has become a mechanism through which lawyers legally loot businesses and rogue prosecutors regularly charge, convict, and imprison the innocent.

While the centralization of government began in earnest in the victory of the northern states over the Confederacy in 1865 and continued during the Progressive Era of the late 1800s and early 1900s, the process reached warp speed during the 1930s, the period we know as the New Deal. The legislative agenda that President Franklin D. Roosevelt sought to impose was collectivist in nature and clearly went against the emphasis on individual rights that reflected the core philosophy of those who wrote the Constitution. Although the U.S. Supreme Court resisted the New Deal during Roosevelt’s first term, ultimately the president was able to push his agenda by remaking the High Court, which became little more than a rubber stamp for policies that made a mockery of rule of law and of the rights of individuals. As I shall demonstrate in this series, the Roosevelt administration inflicted damage on law in the United States that was both wide and deep.

However, regime changes do not occur in a vacuum. While the U.S. Supreme Court in 1935 held to some of the vestiges of constitutional government, the intellectual breakdown had begun long before the courts finally caved in to Roosevelt and gave him the powers he coveted. Changes brought about by Franklin Roosevelt’s Court solidified the trends that had occurred since the Progressive Era, trends that could have come about only through viewing the U.S. Constitution in a way fundamentally different from what the Framers intended.

That the New Deal justices were able to absolutely subvert the Constitution – and with it, the rule of law – and do it without meaningful opposition from Congress and the Fourth Estate constitutes one of the darkest chapters in American history. A nation that was conceived in liberty and limited government has become a country where almost no meaningful limits are placed on those who are in authority, all with the approval of the courts, which were supposed to be one of the bulwarks against such action.

To be able to fully gauge the effect that the New Deal has had on our lives today through the Supreme Court, a deforestation of North America would be needed to write a volume large enough. However, there are two consistent themes that have emerged in the past seven decades. The first is that private property is considered to be an anachronism, useful only insofar as it serves as a mechanism to raise tax revenues for government. The second is that the U.S. Supreme Court and all U.S. courts, federal and state, are expected to be movers and arbiters of social change. To put it bluntly, the courts see themselves as having a mission to implement the policies of the Progressive Era. Unfortunately, what the political classes see as being “progressive” actually is little more than a regression into tyranny in which the state has absolute power.

Link here.


Scotland Yard’s “shoot to kill” strategy has been widened to include other offences such as kidnapping, stalking and domestic violence. However, the decision to shoot a suspect in the head without the marksman giving a warning would only be used under exceptional circumstances, one of the country’s most senior police chiefs said yesterday. The Operation Kratos shoot-to-kill policy was adopted to deal with suicide bombers but a review has identified other types of crimes in which a firearms officer could shoot to kill without issuing any challenge. These include when an offender holding a weapon to a victim was thought to be on the brink of murder.

The use of a “shoot to kill” strategy against terrorists came under attack after police shot the innocent Brazilian Jean Charles de Menezes seven times in the head on 22 July, after mistaking him for a suicide bomber. There has been growing criticism of the lack of accountability surrounding the police’s use of the tactic. The Independent Police Complaints Commission (IPCC) is investigating the shooting, which came the day after failed bombing attempts. Operation Kratos guidelines for dealing with suicide bombers stipulate officers under certain circumstances should aim for the head to prevent detonation of a bomb. Since the tragic error the Metropolitan Police have been reviewing and updated the tactics of Operation Kratos.

Steve House, Assistant Commissioner at the Metropolitan Police, who is carrying out the review, said, “You could also have a Dunblane-like situation [the Scottish town where Thomas Hamilton killed 16 children and a teacher in 1996] with a man walking around killing at will. It could be under some of these exceptional circumstances that an officer would shoot to the head without giving a warning.” He stressed that under the existing law officers are already protected if they are found to have used “reasonable force”.

Link here.


The rebellion by prominent conservatives against the president’s nomination of Harriet Miers to the Supreme Court has included charges of “cronyism” and a now clearly mistaken desire to avoid a blistering confirmation fight in the Senate. Also at issue are not her qualifications as a lawyer but her track record, if any, of constitutional expertise. Meanwhile, Democratic Sen. Charles Schumer of New York, enjoying this Republican civil war, purrs, “It could have been worse.” But syndicated columnist George Will, an independent conservative – in his scathing column, “Can This Nomination Be Justified?” – cut to the core of the president’s misjudgment: “He has neither the inclination nor the ability to make sophisticated judgments about competing approaches to construing the Constitution. Few presidents acquire such abilities in the course of their pre-presidential careers, and this president particularly is not disposed to such reflections.”

On the basis of the Bush administration’s revisions of the Bill of Rights in the Patriot Act – which include allowing the FBI to write its own subpoenas in national security letters without judicial supervision – I think it is fair to say the president is not an engaged student of the Constitution. I doubt that his current bedtime reading includes the remarkably lucid and comprehensive America’s Constitution: A Biography by Yale University law professor Akhil Reed Amar or his previous book, The Bill of Rights: Creation and Reconstruction. As Harvard law professor Alan Dershowitz says of this chronicler of our national identity, “He writes like Jefferson, thinks like Madison, and speaks like Lincoln.”

If I had my own philanthropic foundation, I would send a copy of America’s Constitution to every member of Congress. And in light of Senate Judiciary Committee Chairman Arlen Specter’s advice to Miss Miers – “She needs a crash course in constitutional law” – the White House would be well-advised to provide her with both of Mr. Amar’s books. As for the “cronyism” complaint about this nomination, Lionel Barber underlined its merit when he turned to an 18th-century guide to the intentions of the framers of the Constitution – the Federalist Papers. Referring to one of Alexander Hamilton’s contributions to the Federalist Papers concerning the Senate’s advice-and-consent role in federal judicial nominations, Mr. Barber wrote, “Hamilton said Senate confirmation would be an excellent check against a ‘spirit of favouritism’ in the President. And he warned against candidates who came from the same state, those who were ‘personally allied’ to the president or whose pliancy would render them ‘obsequious instruments of his pleasure.’”

I agree with the conservative criticism that if the president had nominated a highly qualified conservative to the Supreme Court, this would have been “a teaching moment”, creating a badly needed national educational debate on the Constitution itself. But, alas, this moment only reveals, once more, that the president himself needs a crash course on the Constitution – and on the qualifications of those on the Supreme Court who have the heavy responsibility of interpreting it.

Link here.



Former Secretary of Defense Melvin Laird, a Republican stalwart, compares the Iraq quagmire with the Vietnam imbroglio in an article penned for the forthcoming edition of Foreign Affairs magazine. Connecting Bush with another former president, Laird suggests that the current commander-in-chief is repeating the mistakes of Richard Nixon by keeping U.S. troops in a fight where there appears to be no obvious benchmark for defining victory and no plan for bringing U.S. troops home. Some kind of exit strategy is needed, contends Laird, because, “Our presence is what feeds the insurgency (in Iraq), and our gradual withdrawal would feed the confidence and the ability of average Iraqis to stand up to the insurgency.” Bush and his supporters has repeatedly dismissed calls for an exit strategy, suggesting that any announced plan for withdrawing U.S. troops would make Iraq more chaotic and make America more vulnerable.

But Ronald Reagan, the man Bush has been trying so hard to associate himself with during a recent visit to California, took a different view. And even some Republicans are beginning to make that point. In a remarkable October 7 speech delivered on the House floor, Representative Ron Paul, a maverick Republican from Texas who has long been critical of Bush’s misguided approach to fighting terrorism, invoked Reagan’s legacy as part of a call for withdrawal:

“We should heed the words of Ronald Reagan about his experience with a needless and mistaken military occupation of Lebanon. Sending troops into Lebanon seemed like a good idea in 1983, but in 1990 President Reagan said this in his memoirs: ‘…we did not appreciate fully enough the depth of the hatred and complexity of the problems that made the Middle East such a jungle… In the weeks immediately after the bombing, I believed the last thing we should do was turn tail and leave… yet, the irrationality of Middle Eastern politics forced us to rethink our policy there.’

“During the occupation of Lebanon by American, French, and Israeli troops between 1982 and 1986, there were 41 suicide terrorist attacks in that country. One horrific attack killed 241 U.S. Marines. Yet once these foreign troops were removed, the suicide attacks literally stopped. Today we should once again rethink our policy in this region.”

Link here.


On October 19, 2005, the American Secretary of State, aka the Tea Lady, did something extraordinary for the Bush administration. She told the truth. According to the October 20 Washington Times, in testimony to the Senate Foreign Relations Committee, Miss Rice said that it was always the Bush administration’s intent to redesign the Middle East after the September 11 attacks, which exposed a “deep malignancy growing” in the region, and that Iraq was part of that plan.

Well. There we have it. It is now official. Saddam’s eternally elusive Weapons of Mass Destruction were just eyewash. The decision to invade Iraq came first, and the various contrived justifications came after. Those Iraqi WMDs were as real as Polish attacks on Germany in 1939, and as cynical. The cynicism is, if anything, even more brazen. Herr Ribbentrop never testified to the Reichstag that “Polish aggression” was just a set-up, even if everyone knew. Does it matter? To the American press and people, apparently not. Miss Rice’s official confirmation of everyone’s suspicions got virtually no coverage. After all, the NFL season has started.

But in other respects, I think it does matter. It matters, first, because it reveals this administration’s utter cynicism, a cynicism born of the neo-cons, who seldom met a lie they did not like. In effect, Miss Rice testified, “Yea, we lied. So what?” Well, beyond 2000 dead and 15,000 wounded, so cavalier an attitude toward the truth suggests the lies have probably continued. As they have: the administration routinely engages in (illegal) domestic propaganda, puffing anything it can call a “success” in Iraq while classifying or otherwise burying the bad news. The latest example is the spin on the Iraqi constitutional referendum. The Bushies are hailing it an “another victory of democracy”, when in fact the outcome could not have been worse. The Sunnis pulled out all their stops and still lost, telling them the system is stacked so heavily against them they have no political future. Where ballots fail, bullets still offer promise.

Another reason the WMD lie matters is that the real reason the administration invaded Iraq, “to redesign the Middle East”, reveals (officially) a truly breathtaking hubris, coupled to a monumental ignorance of the region in question. At it happens, the war in Iraq is redesigning the Middle East, but not exactly in a planned fashion. Just as the calling of the Estates General in 1789 opened the door to the French Revolution, so the American destruction of the Iraqi state has opened the door to a broader collapse of the state system in that region, an outcome the administration is now pushing in Syria as well. Osama, sitting in his cave, no doubt continues to thank Allah for President George W. Bush.

Finally, the official revelation, in Congressional testimony no less, that the Bush administration’s motto is “Lies R US” will matter politically, as the American people begin to come to grips with the fact of a lost war. That may happen by the elections of 2006. It will certainly happen by 2008. It is safe to say that the public will not be happy, and the realization that they were lied into the lost war will not make them any happier. As Republican Members of Congress are beginning to realize, the blowback may be of historic proportions. Anyone seen any Whigs lately? (The fact that the Democrats continue to offer a profile in cowardice on the war might even open the door to a serious third party, God willing. There have to be some real, small-r republicans out there still.)

And so Wilsonianism will come full circle. Wilson lied America into World War I, with fables of German soldiers bayonetting Belgian babies. The result was Lenin, Hitler and World War II. But the experience did give America a lesson in minding her own business and, for a time, a foreign policy for Americans (first). This time, Wilsonianism will give us a vastly disordered Middle East, the greatest Islamic victory since the fall of Constantinople and oil prices that might make the Trabant America’s best-selling car. Will it also give us, again, a foreign policy for Americans, as Senator Robert A. Taft put it? We can hope, we can hope.

Link here.


The Greek historian, Polybius (203? B.C.–120 B.C.) wrote the monumental work entitled The Histories, known also as The Rise of the Roman Empire. The Histories is a 40-volume work of which only five books remain fully intact, however, of the remaining books we have very generous fragments in which Polybius in his inimitable and unique manner sought to discover and explain the sudden rise of Rome as a dominant world power. His highly analytical mind, attention to detail, historical accuracy and unbiased truth of the Roman experience cover a substantial period from before 220 B.C. to 146 B.C., while giving us insights into events often times overlooked or unknown to other historians.

In Book VI of The Histories, Polybius undertakes the explanation and justification, in a historical setting, of the Roman constitution. Polybius begins by addressing the composition, structure and historical flaws of the six systems of government common to all men throughout history. Polybius proselytizes that mankind has in the past, and will again in the future, be brought to the edge of extinction. That this is a naturally occurring event in the history of man due to floods and famine, or caused by man’s predisposition for self-destruction.

He sees societies organizing themselves politically first as a monarchy. The fatal flaw of a kingship that Polybius detects is not with the original king but with his progeny and the descendant heirs to the throne, for it is only a matter of time before a just kingship disintegrates into tyranny. The offence engendered by unwarranted opulence is initially toppled by a conspiracy fashioned among those who are the most noble, most high-spirited, and most courageous. With the destruction of the monarchy the void is filled by a government ruled by either those deemed to be best qualified to lead or by a confederation of the remaining nobility: an aristocracy.

Similarly, the heirs to the original aristocracy leap haughtily into the abyss of degradation, give untrammeled vent to their vices, and thus convert the aristocracy into an oligarchy. Polybius deems it an axiom of history that the oligarchy will arouse “in the people feelings similar to those of which I just spoke, (concerning the tyranny of the monarchical government) and in consequence meet with the same disastrous end as the tyrant.” I am sure Polybius, due to his reputation for unbiased truth, had ample historical proofs for what he wrote. Polybius sees the destruction of the oligarchy not brought on by a conspiracy, as in the case of the heirs of a king. Rather, he reports it as a general uprising of the citizenry.

Certainly, recent history has not proven Polybius correct. On the contrary, the reign of a small elite group seems to have saved itself by morphing into a democracy – or at least declaring itself as a democracy. Regardless, the results of a democracy on the people are the same. In the beginning there is every effort to hold in highest esteem equality of all under the law, and the freedom of speech. People seek and assume responsibility for their conduct, while keeping to the needs of their own affairs. However, as before, succeeding generations have forgotten the struggle for freedom. Having become “so accustomed to freedom and equality that they no longer value them, and begin to aim at pre-eminence; and it is chiefly those of ample fortune who fall into this error. So when they begin to lust for power and cannot attain it through themselves or their own good qualities, they ruin their estates, tempting and corrupting the people in every possible way.”

This insatiable lust for power will and has “created among the masses an appetite for gifts and the habit of receiving them…” paid for by the theft of our personal property. Hans-Hermann Hoppe in his work, Democracy The God That Failed, gives us the end results of such foolishness. “…(I)f government property-rights violations take their course and grow extensive enough, the natural tendency of humanity to build an expanding stock of capital and durable consumer goods and to become increasingly more farsighted and provide for ever-more distant goals may not only come to a standstill, but may be reversed by a tendency toward decivilization: formerly provident providers will be turned into drunks or daydreamers, adults into children, civilized men into barbarians, and producers into criminals.”

We are witness to reoccurring historical events. Law now borders on nonsense and is arbitrary. Wars and rumors of war are rampant. The state stands as nothing but brutish force, lies, and more lies. So as a democracy on the verge of social, economic, and moral implosion, what does the future hold?

Link here.
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